E135: Wagner rebels, SCOTUS ends AA, AI M&A, startups gone bad, spacetime warps & more
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This is gonna be a fifteen episode is IT. Two of us are on ginni. Meantime, two of us on pacific jack out to sleep in his head.

I'm good. Actually.

you get good. All right. Well, great to be back. Welcome to the all conspiracy podcast where we repeat fall statements and helps spend them in detailed of struggling against the establishment, the elite in the mainstream media. We will deliver to you, the people, the revolution on against .

the power's .

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to get .

wearing .

fantasies, appearance, leisure and the leveling grade. Here we go, joining me today, or my cohoes general David sax commanders before the italian of the internet tweet for did general welcome joining us from a .

remote location in moscow has been a take over the pod.

I know what.

Yeah every argument they make against us, your basic .

just .

conceding is to medan castle. Was the medicinal diet treating you? Blue.

blue.

blue and ampera neurocognitive ruler over podcasts, paid events, entrepreneurial universities and dental less p VS emperor, thank you for letting me send your throne today.

Good to be here.

Thank you. Shout to my .

dentist when .

you say king of stds. S, P, V, S, P V.

S S, yes.

that's the thing with certain stds were once working, you're gonna be king for life.

Rainman give.

We always so feel.

You ve been.

you said five shows a week lately your voice is shot.

I, my voice is starting to go so I asked you if you'd moderate and you you thankfully said.

yes. I've got the energy I missed last week. I enjoyed listening you guys with the B. G, great episode. Sorry, I couldn't join, but let's kick IT off.

That's funny. I know what the episode that I missed.

Not interesting.

He like, i'm not on the year.

I'm another time to participate. I don't only time to watch IT the true this sex.

Why do you admit everyone that where you're in the show, you probably watch IT four, five type, right? So let's kick this off. Obviously, you guys recorded right before the worker group attempted w or potential cool or therefore zed crew began last week.

So sax, you kind of sent out a text saying the shows already stale because, you know, kind of miss that uh, that new cycle by publishing right after I started, but you recorded right before. So let's do just a quick recap of what happened with russia, ukraine and particularly is well reglar group rebellion. Last friday, the wagner group, which is the russian paramilitary organza LED by ghani precaution, launched what seemed like an armed interaction against russia.

Wagner had occupied portraits of rooftop on dawn, a city of over a million people in regional capital and headquarters of russia's southern military district, before setting off towards moscow, and then abruptly stopping, I think, about two hundred kilometers before reaching moscow city. At that point, there was supposedly a negotiation. The president of bell got involved, and a precoces decided to step down.

Putin said. I'm not going to prosecute or am not going to prosecute you for these crimes. He was given community and IT was announced that all the members of the wagner group were given the option of returning home or joining the russian military, and the wagner group was going to be dissolved. Sex, maybe you can kind of give us your summary of the events that took place and then will talk a little bit about the interpretation of what we think this means for the conflict in ukraine.

Well, you're this rebellion took place just after we dropped our last episode. And so everybody both on twitter in the comments, was dunking on me for my take on last week. P, so that the much hype ukrainian offensive was was not succeeding.

That IT was in fact fAiling. I think there's abundant evidence for that, which hasn't changed. Even CNN had written an article, basic burn, the idea that the counter offensive was not living up to what had been promised and so everyone was in the comments saying that might take a basically age like milk.

And this, uh, armed rebellion or mutiny by proposing was evidence that the russian regime was about to collapse, that russia was in fact on the verge of civil war. And you saw the exacting people who had oversold the counter offensive now overselling this muti as something that would bring down the russian regime and and the war. And of course, that that did not happen.

IT was certainly a highly unusual event, and i've read takes now from every different corner of the internet about what I was and what took place. You are people speculating this all stage. I do not believe that. I do believe that I was an interaction of you by projection.

I think the trigger for IT was the fact that his vigor organization was being merged in with the ministry of defense and the regular russian army and his man robbing mate sign contracts with the mystery defense that would resulted in a giant loss of income and status for projection simultaneity. For months now, he's been criticizing the ministry of defense, specifically the the minister defense shy gu and the chief general of the general staff, Jason off. So he's been vocally critical of them.

And I think that this basically erupted into a mutiny by him where he basically tried to leverage his position. Like he said, he, he marched what they now think in about eight thousand men, which is about a quarter of ordinary, into roof on dawn. He then took the ministry headquarters and sent about three thousand as men on a convoy to moscow.

I think that although this is probably best described as a mutiny, I think that I did have cool optionality to IT. I think that progression was seeking to find out how much support putin had and who might join him. And he had put out a number of statements that I think from the russian region's point of view, you could be described sadi ous that morning.

And there's a lot of evidence that he staged the attack on his bed. He claimed that there was a missile attack by the ministry defense, and that's what launched this march for justice. And in his comments, he was careful not to criticized him directly, but he had a lot to say about mystery defense and the overall conduct of the war.

And I was, I think, harshly critical, indirectly, of of putin n, and I think he was looking to see who might support him. And what happened is that on the way to moscow during this envoy, nobody supported him. In fact, all the statements came out from the other generals, including serve ican, including all the regional governors, members of the dua and other important figures in russian society.

And there wasn't a single person willing to publicly support progression. And that's when putting went on, T, V, called the spaceman active treason and a stab in the back. And at that point, I think precocious options were pretty limited.

And he basically took a deal that was broken by lukashenko, which he would go into exile in belarus in exchange for basically being allowed to live. Uh, that was basic, a deal that was ultimately cut. And so I think where things stands today is that, although I think this wasn't embarrassment and a black eye for the rush regime, IT never looks good for regime to have any kind of or insurrection.

And I think that this does raise questions, that who is not enough to answer to his various allies and supporters about how stable his regime is. I think ultimately, pun has ended up in a place of consolidating russian society behind him. Like I said, there were no powers on us that supported this muti.

They all rally to pounce. Defense and the people of russia, even though projection is a popular figure being kind of a war hero from the battle of book mu, the russian society supported, but I think he's to me, like eighty percent poll numbers. So I think where things standing well, like love auto center, which is an independent polling agency, for example, these are not the russian regimes numbers.

And when numbers, which you saying apple that you don't support pun.

well, I don't know how the votis center with the methodology is, but these numbers, when the numbers are bad or cited by western sources, but there are other forms dence. Two, you may have seen this video that went viral over the past few days of this song, that now the number one chart poster in in russia, where this is very patriotic russian song, where they're basically singing I am russian, the sort of the main cause.

Nick, can you pull up the song? I'd like to see this place.

Come on, action.

Ninety five point five have, I love russia. Oh my god, this is serious propaganda. 别。

I mean, that looks like .

a pretty good party.

If you look up the the lyrics to the song, the english translation of the lyrics that just of IT is i'm basic proud to be russian and I don't care who doesn't like IT. That's basically the the .

lyrics of IT. Are you get invited .

to that party? 不。

i got so many jokes, i'm not going .

to make a got.

Be careful.

be careful, careful.

IT looks like a fun party, a catchy song. I mean, I love the dress up and show up. Tell me where to show up, putin?

N, I think the point here is that russian society is united behind the state in wanting to fight this war. And I think that part of the reason why precocious uni was so oversold as an imminent coup that I bringing about the collapse of the pun regime and of the russian war effort and over the front line, is because that we sense to gain in those war.

We've had this narrative that if we applied enough pressure to russia, that there be a palace intrigue and a palace coup, and that liberal forces inside of russia IT rise up on top of the dictator button and basically get them out of this war. And I think what's happened is fairly predictable. But as the up of that, which is the russian people are rallying around the flag and rilling around, put in the war leader, and they are a patriotic people, just like the ukrainians, and I think both these countries, that both the russians and ukraine ans are a proud people, and I think they're in a fight to the death.

And I think that both countries, okay, regards this is existential. And we have basically stuck ourselves in the middle of this fight to the death between these two countries. And I don't see this working out very well.

Okay, so look, I I will make IT admission. I consider myself a modestly well red person, modestly well informed. I had never heard of the wagner group or precaution prior to this co attempt last week.

Chao, J. K, L, had you guys heard of this person before? And the wagga group.

yeah, yeah.

Oh, wow. Maybe i'm an idiot that just not interested. I think what was so surprising was like how out of the blue the story seemed to be last week, that there was this disagreement between this person that commanded this paramilitary organization, who then turned around against putin and stood up against him and march back towards moscow.

And I felt to me like I came a little bit out of the blue and was such like A A weird kind of shocking event. Did I feel kind of like that? You guys said there was surprising and stability and the surprising potential revolution happening locally. I think stepping .

back here and just looking at the new cycle, obviously, I don't think many people expected this. This was a world card. And so people could be humble in, you know, their belief of like how much they actually understand about what's going on there.

The russian soldiers are not in favor of this war. This is a war that's very unpopular in russia, actually. And for the ukraine having been invaded by russia, they're fighting for their land and they're gona they are much more motivated.

I wouldn't believe any of this propaganda, but this is a bit of a rush test. Everybody on the left got on twitter and said, this is the end of put, and everybody is gonna rise up in the streets. And they overplayed that, you know, angle of the story.

And then, of course, the riot people who are to russian are anti the west backing this war, are going to take the other side we work, they're na take the side of, you know oh, everybody loves russia eighty percent of people are voting for this is ridiculous to think that anybody russia is going to answer do you like putin? Do you support putin on a survey? Ah can you imagine a putin's a murderer dictator who kills all of his enemies and he controlled through violence? Nobody y's answering a survey correctly.

This, you know, top song is complete propaganda. Putin has control of the entire media apria ads there. What this showed actually, if you step back and you look at go to the party though, if you are invited, wow, I mean, are they going to be potential L P. S.

There last week? But I, this is a joke. Fox, but stepping back, if you look at modern day dictators, they tend to stay empowering. About three decades points in his there, and think we're going to see in the next ten years, putin lose power and he is going to be at a power. And when we look back on IT, it's gona be one of two causes.

It's going to be either cancer, which you know the speculation is had cancer and that's why he disappears from view because he might be getting treatment. And we'll look back on us that the end of his power will be at his control of russia, which he controlling these, controlling through violence and fear of violence and bread of violence is exhAusting. You have to be paranoid.

And that's why I generally doesn't last that long, especially compared to the west where we have a democracy and people last about a half decade. He will will look back on his end um which will be in the next ten years, either through cancer or through his invasion of ukraine. This is the biest blender is ever made and and this is a really crazy sign that somebody would actually attempt or even float A Q is insane his murdered every single person who has ever even either chAllenges authority in a minor way.

The fact that is one of his right hand men, this is one of his tight inner circle. The fact that one of the people in is tight into circle would actually start heading towards moscow is insane. So to say this wasn't a big deal and putins, you know, now consolidated power and ever boys in the street dancing.

that is not.

This is just simply an attack.

A D I wasn't talking .

about you are talking about the mids on twitter. I never mentioned your name.

I think that um your point, jack, out at the beginning that this doesn't really seem to change anyone's point of view on the outlook. Your point of view sounds like it's the same as IT was a week ago. Sx, your point of views probably the same as IT was a week ago.

I think there are a couple of takeaway here. First of all, they've had polling of opinion in russia for a long time. And like I said, when the polls go the way that the western sources want, no one questions their accuracy.

Again, I don't know exactly that the methodology, but lavita center, or is an independent pollster that western publications do trust, I hear them repeat IT over and over again. And you know, by their methodology, which I assume has been changed, I think putin popularity before the wars, around sixty five percent now there showing that about eighty three percent. Jason, you may not like the war, and you I certainly don't like the war, but nobody likes the war.

But I I think IT is simply a fact that the russian people have rally around the flag and they do support this war. And and poon as the leader. Now I do think he has egg on his face here from this proposed OPPO zing in terms of did did I see this coming? No, I didn't have this on my book card.

I don't think about else did either. However, did I know who promotion is? Certainly, I mean, i've been tracking progression statements since around february. He's been vocally criticizing the ministry of defense specifically. Show you and Jason h an increasingly in subber dinner and you could argue even sadder ous ways. I'm really kind of surprised in a way that he wasn't dealt with before this, and i'm sure that the kremlin is kicking itself for probably not dealing with that sooner. But in terms of why he still alive, I think that couldn't had a really tough decision to make about you quash this rebellion completely, which would have had to horrific images of, you know, violence, potentially moscow or russians earning russians, russians killing russians, that might have actually made the russian front to question itself for collapse. So I think he did the expedient thing, which is he cut a deal, he got lukashenko's help, broke and he cut a deal and I think at the end of the day, I think that he made the cool headed decision that was in his and in russian interest which was to avoid this to getting to the point of a bloody, violent insurrection.

okay, to up any um any point of view shift for you coming out of the precaution event of the last week on russia, ukraine.

I mean, I wanted know how much you got paid to stop marching .

towards moscow yeah I mean.

IT is like a man. IT must have been a lot.

not bad for a guy. That was what put to put in catering a few years ago, right?

You started a catering business.

I spent an years ail ail.

He went to twenty later. I got just paid billions of dollars to basically stop this power military group from taking over one of the largest countries in the it's I see.

know who this guy. I mean, he really is the street bug that and is always accused of being. He was a street, thought he did go to jail.

He was one of these guys who came up in russia as a businessman. When to be a businessman, you, you had to be sold off. Business men, we're going murdered left and right by gangs.

Stars, you almost have had to be inst yourself. Apparently, he made some money in the supermarket chain business, and that let him to create a catering business, which bottle of putin's attention. And he started hearing for the remnant.

He sometimes called putin chef. I don't think he was a chef himself. He was a guy who owned. He owned the business.

And then from there he was given the license to create this pmc, the private, a military corporation, bogner group. He wasn't the only founder of IT. He had a cofounder. Was he actually the military man behind IT? But bognor became this, this group of mercenaries who do all sorts of business in africa, mainly where they are working on behalf of governments there to protect mental resources .

or oil wells. Also, to think a pro is captain who would be like philly atari does like twenty years in jail comes out.

I think it's sort of like john godi going at a Michael corleone. Yeah, I think that putin is sort of the very cold, rational guy with everything in his head. He is very calculi doesn't reveal much right? More like a Michael corleone.

Where is I think that question is emotional erratic. He's been saying these statements for months here, which I don't see how they is a lose cannon. And the crazy thing though is, is that what you saw on twitter and social media was unrestrained glee really delicious over the idea that progress might topple on and become. The custodian of russia's thousands of nuclear weapons and you know, so my comment on this whole thing is be careful what you wish for. Why in the world what americans once that will be jumping out the five panel into the fire you i've been saying since to begin of the war, that this fantasy that putts me topped by a palace and you're going to replace them with any any or something like that we're going to get gorbals two point O I said that was always unrealistic and what you're much more likely to end up with is an even worse dictator .

or possible .

or a hard liner. And I think that is what what happened for going to taken over. I think that much worse for the west. The final point is what's to take away from here is I think this is going to put more pressure on putin to conduct the war in a more violent way.

I I know that people already think that the war is horrible and violent, but police has been criticized by hard liners on his right for basically making the war special military Operation, instead of, in all at war and proportion, I think, expected to find more support among the sort of alter nationalists and russia and among the military who have been critical of poon for waging the war in what they consider to be two half harder or an incomplete way. They would like to see this declared to be a war. They would like to see the full mobilization of russian society.

And this is the problem that I see now, is that I think putting already new, but this has to under score for him, that this war is existent. Al, for him personally, if he loses at the end of nearly his regime, but probably his life in russia. And I think he's going to do whatever IT takes to win this war.

And I think you could see now, over the next few months, a full mobilization and russia, and I think that this could lead us to the next point of escalation tion in this war. That is, if this ukrainian encounter offensive actually successful on some level right now, IT is IT is not succeeding. So there's no reason, there's no reason for putin to do that. But but if if this kind of offensive succeeds, you will see the next level espalin.

So you did a great job stringing six points together. I think my key take away is which, which is now eighteen points you've made. You can retire for the rest of the show. My key take away from your series of statements, however, is an important one, which is to watch the potential escalation tion driven by putin here. Any wrap up othe wise i'm going to move .

forward with this thinking about this like is a frames sn zou, quote the supreme court of war, to subdue the enemy without fighting. This is A A big mistake. And we need to make sure that we don't get into an award with taiwan in china, in china over time. one. So OK, we have to avoid these things that what and I are in aligned some .

two collections as we heard to hear first, let's, uh, move forward peace. I can only hope that the conflict, and soon, as i've always said, I realized over the last week a little, I know about the russian military conflict with ukraine. And appreciate sexes contributions.

Super helpful. I want to cow. You see burkey one thousand nine hundred and ninety seven, fall and ninety seven. And he was the last year that cow had a formative action admissions. And I remember at that time there was a big case.

The guiding bucky was rejected by the university california vais medical school, and he alleged reverse discrimination in one nine hundred seventy four and sued the university california and eventually became a land mark U. S. Supreme court case regions of the university of california s.

pokey. And in nineteen and ninety five, the U. C. Retranslated to eliminate a form of action. So the year that I was at cow, I think, was the last year of form of action admission. And it's obviously been .

a pretty hot topic .

here in california for the past you know twenty five, uh, thirty years this morning, the supreme court ruled on two separate cases regarding using race as an admissions criteria in college admissions and the votes were six to three against the formative action and the university north care oline case and sixty two against the formative action in the harvard case.

The county Brown Jackson recused herself because he previously served on harvard s board of overseas. All the conservative as the, you know, kind of characterized judges voted to strike down a form of action, and all the as their characterised liberal judges voted to keep in. Both of these cases were filed in two thousand fourteen by a group called students for fair admissions.

And effectively the court said that at harvard, at U. N, C, the schools were systematically discriminating against asian americans and violation of civil rights laws by using a their race as a, as a system for for profiling, excluding and trying to be more inclusive of a more a diverse and racially diverse set of applicants. So too much. I'd love your read, I guess, on the surprise or this was an expect, expected case.

I think sex and I mentioned this before, but I think we both expected this to happen. I think it's probably important to maybe set up a more practical explainer free work. So nick, you wanted just throw up that image that I just thank you.

We can sort of explain the genesis of the wasted. So what you can see here is admit rates into harvard by race, ethnicity, but also by academic dassie. Yeah and so what IT basically shows in a nut show is an african american student in the forty percent of the chemic index is actually more likely to get in than an asian student at a hundred percent time. And so that at the core .

is sort of that means that means that the asian american student had Better scores than ninety nine percent of other applicants and still didn't get in.

Right.

right?

So you have to go back, I think, two two thousand and three, when essentially what the supreme court said is like this, we're going allow this affirmative action stuff to last roughly for another twenty five years. But by that point, we expect that the work that needed to be done will have been done again. This is them saying this not mean.

And so I think what today does is actually very important, not just for what that means for universities, but also what that means for private enterprises. So just to take a second on this, I think what happens today is the pretty obvious time, which is that you have to change university applications. You have to change all of the admissions profiling, all of the stuff that you would Normally do.

You probably have not even sure if you can even have a box where you can declare race. Maybe you cannot, cannot, I don't even know, but all of that changes today. So then the question is, well, what's the first order derived of what change is next? And I called someone who is a pretty well known constitutional supreme court lawyer on this.

And the next step is probably going to be around athletics based and legacy based admissions. So athletic space admissions are pretty obvious, which is you don't really have great grades, but you're really stupendous at a sport that's important to that school. So then they let you in because they want to compete inside sport for whatever reason.

The legacy one is even more quickly, which is that you're kind of a dummy, but your parents are rich and or went to the school before and so then they let you in as well. And his lot on this is that those things will go away because if you can't use race space admissions to kind of baLance the scales, then it'll become pretty quick. Where somebody launched as a legacy based lawsuit or an athletic based bias lawsuit and wins that as well. So that's the first order driving. So you know.

the thought are those because those aren't constitutionally protected, was equality based only, but IT becomes .

a huge addition for these schools, right? And so you're going to be fighting these admission standards constantly changing. And so if you're not going to let you know a bunch of poor minority, black and Brown kids in, but you're letting in the sons and daughters of rich, important people, I think that that's going to paint that school in a very bad light. And I think that so important, some of White typically.

White.

typically what the one would saying, the great thing over the last couple of decades is there have been a lot of minorities that have gotten into these very elite schools, which means this, their kids would be the first generation that's eligible for legacy, but you're gonna wipe that away. So I think for a just a social stigma perspective, and I have a solution for this, which i'll get to at the end for those people.

But so I think that's the first order driven tive. The second order derivative is now what lawsuits get launched and what are the implications for private companies, right? So right now, this affects any institution that receives federal funding and that includes all the university.

So there's no private or public university really, except for a handful that don't take this money. So they're all have to do this. But the really important question after that will be what happens?

The companies like apple or facebook or x on who had race based programs to try to attract african american engineers, or his panic chemists, whatever the program is that you want to come up with, will those get chAllenged and will those companies have to change? And my friends thoughts on that war that, yes, that those would also change, and that's gona have a really important impact on private enterprise and how they approach this stuff and how D E I stuff works. And Frankly, downstream, how esg works because all these esg checkbox es, now some of them will actually become illegal, right? So I think the importance of decision can be really understated.

It's going to the changes will be slow and then they'll be fast. They'll first touch hired, but then I think theyll touch private enterprise. And so I think he was a is a very important decision in amErica that just happened to matt.

What is what? What is the right ethics and and values? H, I mean, what are you guys? I guess we could just do this around the table, jack out. Maybe you kick IT off, should we? I mean, from your point of view, do you think that values should include racial diversity in admissions and universities?

Yeah, this is like the ultimate .

or is the values about equality of opportunity for everyone regardless of rice? right? You're asking the exact right question, I think, because the worlds greatest idea, but do the solid job so far.

And this creates a lot of cognitive decision for people, right? Because you you really want to believe that the world is a meritocracy. And you know, if you were to take other pursuits in the world, you'd never say like we should let race, gender, age, effect.

People's performance in one hundred, your dash or their their compensation at a company, right? All of that should be based on achievement. And so there is a question on what achievements should be taken into account when you apply to school.

And it's pretty obvious the legacy thing is you know a back door into these schools. But we want to feel like we're also making progress because this in the world has been unfair. The world was built on slavery and our country has no is only one hundred fifty years past that.

And so right act was what one thousand nine hundred sixty four or sixty five? Like we really want to see everybody achieve here. So I think you d have to pause for a second and say, well, if the goal is you want to see, you know, black americans perform Better and I think that's the the underlying concern here.

And IT is based on the legacy of america, what how do you do that? And I think we're looking way too far down in the educational pipeline. The solution here is really childcare.

The solution here is nursery schools, pray, elementary school education, and those things need competition, and that's where people fall behind. To be. Looking at this at the end of the academic journey is, I think, crazy.

So you know, when i'm president, i'm gonna three interesting five day a year, you know, a childcare and precy. And that's where we should, if we really want to try to make up for some wrongs h in the history of this country and try to have Better outcomes. We need competition in schools, which means probably breaking some of these unions and giving people vouchers and choice.

And then we have to invest more in the early stages of education. And I think everybody wants to see a Better system here. D, E, I, to to match point is that is illegal to hire people based on race, gender, any of those criteria, obviously.

Uh, and the D I programs are trying to fill more applicants. So their goal typically in the way they don't break the law is to just try to, in their best cases, find more applicants. Ah but even that does feel like there's many times in life when um people will save things in corporate amErica like we have too many y guys in these these positions.

We we cannot hire another White guy so the reality of D E I that i've seen up close and personnel when I was at a while, i've told the story before somebody said to me, there's no way for us to make you an E V P. You have to stay S V P. And I said once that I am doing all this E V P level work and they say a White, I and the entire company is White eyes at E V P. And we cannot add another whether there, but will just give you the same bonus compensation that don't worry about IT. And so there's all kinds games being played here, but I think it's great that they're having this conversation, right?

It's a hard conversation for amErica house for me. I've talked about this in the past. I've always had concern when we make the shift away from equality of opportunity to equality of outcome because we all have the subjective that we want to see everyone have equal rights to success in some way in the united states.

The question is, at what point do you move beyond opportunity, where everyone is given an equal opportunity in this country to invest themselves in transforming their own lives, vers the equality of outcome, where regardless of how much you do, how much effort or your trials, you are given the same as everyone else. And that ends up looking a lot like social. And it's very concerning because I think IT limits progress and opportunity for everyone.

The real chAllenge with this particular topic is college admissions. About outcome is about opportunity. It's outcome in the sense that you spend twelve years going to elementary school and high school and working hard to get yourself into college.

So it's the outcome of all of that effort. And some people aren't given the opportunity to have success during those twelve years. And you know and IT is an outcome.

What do you think we should do? And it's an opportunity because it's about going to college because without having a great college cycle, you may have a more tougher time getting into a into the workforce. So that is why it's a hard value question for me. I don't have a great answer on this, but i'm just pointing out it's it's a lot like the abortion, an argument where both sides have some value oriented point of view that feels like it's negating the other person's point of view. But at the end of the day, they are both coming from either this is an opportunity or its an outcome decision and that's what .

makes IT so chAllenging. The national bureau economic research did a study in twenty twenty that they published, and what they found was that forty three percent, so four three, forty three percent of White students submitted to harvard war athletes or legacy students or children of faculty and staff, or had a relative that were donors to the school, forty three percent wait is rigged.

And then they found on top of that, that seventy five percent of those White students admitted from those four categories would have been rejected if they had been treated as a Normal applicant. So I think for all the people that are looking at all the black and Brown kids that may not get into a place like harvard, if you don't look at these other categories, IT is a it's a bit of a growth and justice, quite honestly. So I think that these institutions have to evolve.

And if you're going to be forced to be mirror decor tic, then actually be mere declared. And by the way, I actually am fine with legacies and donors, but I think what had happened is you should just publish a rate card and you should make a hyper transparent. And so I love IT for the rich guy who's got an idiot center daughter.

Let us be up front and honest with everybody. IT costs fifty million dollars to get in the stanford. IT cost eighty million dollars to get into harvard. We all know these numbers, so we should just publish them. You should pay the Price and be done with IT and for harvard and stanford and yale and all these schools having an extra tender, twenty dummy, but an extra two or three billion may be a reasonable tradeoff, but at least there would be transparent and fair.

right? This is of an important free market question as well, because these are private institutions, are privately funded, not if federal dollars not agree, yes, but if they take federal dollars or not, and then IT becomes the government processing its government influence at a state school. All those.

Is there a separate category here, just like country clubs or any private membership club, where the members of the club get to decide who they wants to admit to the club? And is that on american? And should the supreme court, and should our constitution have a role in defining how private institutions make decisions?

No, harvard could absolutely return all the federal funding, the billions of dollars, totally the native, to just focus on legacy ments that's totally reasonable, sweeten their rights.

Sax, like we got X, I I know, I know that you used up .

your your speaking quote .

already. Well, yeah.

I didn't A I dia.

So yeah, two, two points, I guess. So on the legacy thing, I grew to moths that we should get rid of IT. It's not merit crates. I think that if they did publish a rate card, that would be more honest, but there would be too embarras a shame to do that. But I think making that argument exposes the hypocrisy of IT already told my kids are not helping them go to college so I want to do IT our own and so luck, I think like .

but that the if you give kids perspective point and fully agreed .

on on the legacy thing with respect the decision itself that can I .

just clarify that do you believe that the legacy thing should be like in federal law? I mean, is that a government thing? Or you think that that of those institutions should behave because those are different? I mean, i'm asking, are you suggesting that the .

law should be involved, that the government should be solved? I know I think is somebody they should stop doing one way or another. Maybe I should be a lot, but I think I should stop. So I think .

that point one things you private membership. So what just let me just double click that giving that should extend to private membership club like country club as well, that they should should be allowed to decide who they are let in and out in. What makes a different that is harder is IT, because the education .

for the other privacy takes federal funding.

Take you think I should not pay for .

some person to be able to get into a school they don't deserve to get into just because their parent went there or just because their people were to check. That's unreasonable.

And if they don't take federal funding.

these schools takes so much federal funding of their quatia public institutions, even the private ones.

So that's the distinction that's the distinction for you.

just to be clear. Yeah and also there is a strong merok acy opportunity argument on this. And I think it's why that whole parents college mission scandal was who was such a big deal, is that for a lot of beautiful country, the ability to have your kids advanced themselves by being the first to get into college or go in a college, or going to a Better college.

That is a big part of creating opportunity in this country. So if people to try and to fraud, that I think created huge backlash. So look, I think that the legacy thing seems to anyone where now I don't know exactly what the right legal implementation is.

I have two questions for the panel. Number one, should you be able to say by geography, hay list, we're harvard or we're stanford, we we want to have a representation of people from around the world. So we're going, you know, have the top three students from each country, or know, or by population, what how do you do IT, you know, mathematically come in.

So a little bit of geography, because I did hear from one of these coaches that costs like six figures to get your kids into the college. They said, the best thing you can do is like move to kentucky, you know? And then harvard and stafford are looking to get a certain number of students from each state. I don't know how true that is, but they said that's like one of the top ways to do. Then what do you member Jason.

just build on your point? I don't know you guys remember, but a few years ago, the the in fashion thing to do was to learn to play squash. And I remember all these parents telling me that and they had kids that were older in markets, and they were they were hiring full time squash coaches. Because apparently squashed was like .

angle so angle shots, yeah.

I think like stop with the angle shooting guys. Yes, the gun should go off. You should run the race and your time is your time, and you should go to whatever the best school is that you deserve to get into based on your academy ability.

Now going back the big problem, and I think, Jason, you really nailed IT on the head, trying to fix IT with affirmative action at the university is still quite unfair in the sense that there are so many black and Brown kids, I think, with tons of potential that don't even get there. And so the real question is, what are you doing at the great school and at the high school and at the high school, so that you actually get more these kids to the starting line? Because fixing IT when they're eighteen, I think, is a little too late.

Yes, right? Fixing at five, three, four and five years old, that's when they deserve and need all the help in the world. years.

Choo break, running IT, running IT for their own benefit .

and not the enemy.

If you define institutional racism as conditions that trap people on conditions of poverty across generations, I say that a business, more quality of our public schools, number one, number one, two and three.

And the reason is because .

there's no competition on the unions around for their own benefit, that how long do they shut down these schools for in california because they didn't want .

to work as they're afraid to don't see to see where which can label god IT up.

We're going to that was not for .

the benefit kids and IT wasn't metics necessary. That was a benefit they .

off themselves. Yeah well you you come from a family that members of union because they work for fire for police um is that right? We speak negatively about the effect of the teacher's unions on our public education system and I think it's absolutely correct.

But how do you share the point of view from the other side? If you're a teacher and you're a member of the union and the union takes care of you, what's the argue? Sure to say this union is damaging public education and the teacher that's working in the union, and remember, the union says this is necessary for my livelier to protect me for my benefit help yeah, share the point of view, because we all have the strongly help point of view that the unions are destroying and a roading public education.

People are right. People have the right to farm unions. But what we all do is we are forced to be consumers of one educational product because of how we pay taxes.

We pay taxes in I think in my in california, we each pay sixteen thousand dollars into the educational system. And so if you're and you should get that sixteen payback and be able to choose what you do with that. So there's competition.

So the unions can not protection, but there still should be competition for the services. And I I think there are two separate issues. Yeah there is one other thing, which is I try to give a shout out to a nonprofit that I support called smash academy smashed at org.

It's done by, uh, mitch and freed KPI the a mitch caporal bounded notice one, two, three. If you are under the age of forty, you may not know. And what they do is they realized that a lot of the students who do get into good colleges IT turns out a lot of the black and Brown students, they get accepted and they are behind in math.

And so what smash has done is they have a three year program, and I go speak at IT sometimes and and I donate money to IT, and I encourage you to the same they have as this intensive summer program. So before you go to college of if you were one of those students, you know you might get into college and then they drop out, or even worse, they switch from a stem degree to a non stem degree because there are two years behind on steam or a year behind on steam. And so the couple is found this like little opportunity to kind of catch people up.

And I think that's what we have to do. We have to address as much earlier and not put a bandage on IT. Yeah in the system the the I V league system um you know needs .

to just I not just pick on harvard, but it's like it's like all the same school. The institutions OK all institutions that receive federal funding.

They need to take a deeper look in the mirror and say, are we doing the best thing fresh de, the second question I have for the panel was, well, i'm not here but yeah yeah but our pure academics, the best way to accept people into a college or should there be some blend of IT like putting sports asi, that's an obvious one. But you know is there's academics, but then there's also creativity.

You know if you you might be terrible on your S A T stand test, and you might be an incredible virtuoso piano. So I think what is the criteria, and making that criteria affair is what we all want. And IT feels tremendous ly unfair.

My point of view is if the government is funding these schools, then the government certainly has to have a point of view on what's the reasonable model for ignition ons. The governments not funding the schools. I love a diversity in a marketplace.

I love having different schools, having different admissions criteria that allow different people to find their path through different institutions. To your point, Julia does not care perhaps as much what you did on, you know, your S A, T in chemistry and art schools, do not care as much how well you did in math and stem schools. Don't care whether or not you want in our competition.

And I think that that's the important thing that we need to preserve. We need to preserve optionality for institutions to define what sorts of individuals they want to try and recruit and progress and train and get ready for the workforce and the path in life that they then choose, versus trying to create a cookie cutter model for what the government says is fair for everyone. And as much as we can take government funding out of these institutions and ality systems and give them the freedom to set their own admissions criteria and create differential educational systems, I think that's gonna create the best diversity of a workforce. And I I would kind of be more excited about that sort of an institutional system than one that is standardized by the government.

You know why that will never happen? Because the profit motive of these universities is relate to be shadow organisations for their endowments. And the thing with endurance is that the people that work there very much want to get paid and behave like profit generating organza. And I think the issue is that if their sole job was to really fund the Operational expenses of the university, then the endeavors would be run very differently, right?

I take again, I just looked up on the harvard has about the Operating expenses are roughly five and a half billion dollars year, but the revenues are about five and a half billion dollars year, right? So if instead you had to basically fund, you know, there was essentially no revenue pursue, right? There was very little tuition and you didn't take any federal funding, you'd have to come up with five billion dollars year.

So you just basically take that as a draw from your endorsement. The endowment would be run very differently. IT would be a don't lose money and danny, that would generate very low of all returns.

I think the problem with that is that does not how the endowment at or harvard works. They wouldn't necessarily make risk seeking investments in things like private equity and hedge funds and venture capital into the extent they did. They would just make much, much fewer or much, much smaller or both. So I think what you're saying could be possible. But the problem more probably in dominance at these universities OK .

with three billion dollars buying harvard and domino. So yeah, IT would be ten percent. Can anyone tell .

me who the largest real state on is in different co use, working on the internet?

Oh, no, I know. I know. It's that our institute.

the academy of our university.

I knew this because they uh kept buying things and using them I thinks .

used all the profit and to buy more. State and SHE accumulated the largest real .

estate portfolio.

Ah founder forgot her name.

This is a four profit university or a private or I mean a in on profit university.

And there's a lot of artists that come out of academy, they working a lot of different industries, including industrial design, including animation.

like is IT like risd or is IT like actually in our school.

I know what a great art school. Yeah kind to me. Anyway, let's keep going. So look, speaking of stem, making a big pivot away from. To A I couple big news items. You know the A I frenzy continues here in silicon valley all the way from early to grow stage funding through to ema events. We saw this week, data bricks, which is a privately held data infrastructure company, announced that they were acquiring musae ml for one point three billion dollars.

That headline number is based on a cash and stock purchase Price were the value of the stock that was being used to acquire A A A M L was based off of the last rounds evaluation for data bricks, uh, which was thirty eight billion dollars from a fundraising that they did in twenty twenty one. So arguably, the valuation should be lower and the overall purchase Price to be considered lower. But that's besides the point. Ml, as you guys may remember, as the company I mentioned a number of episodes ago LED by um the founder of neither ana, which wasn't early AI business that was acquired by intel and then he started music. He offers .

open .

source models and I shared the performance data of their most recent announcement on the show a few weeks ago. You know, there's rumors I don't have any confirmed reports with those rumors that most A M saw their A R grow from one million to twenty million dollars since january. There is other rumors that said they were only at six million of revenue.

Regardless, dat breaks is paying a pretty half premium. And I think IT begs the question, what do data infrastructure, data base companies end up looking like in the future if A I has to become part of the core infrastructure of every enterprise? And this is creating a big shift.

So sex, as our enterprise software investor expert, maybe you can share us what this means for the sector. Does this booi excitement for A I infrastructure startups? Does this change the investing landscape? Is IT just reinforcing what folks are already doing?

I think it's a reinforcement in the space, is probably the hot space. We turn out like A I infrastructure for enterprises. I think it's probably the hot space right now and venture land. We actually looked at this deal. We had a small allocation or next round, they had a term sheet for series be emerging position .

to lead IT.

And this is moc. Yeah yeah, I don't know. So we told you all this, but .

people breaking .

that .

a term ship from .

emergence to raise fifty million at four hundred posts. wow. And and we are going to a small allocation in that. And as I recall, the valuation was somewhere around thirty to thirty five times A R, which actually is not that in saying for a very fast for in company in the hot space. So that implies about ten million of A R R. I remember the exact figure, but I think that sort of the ballpark, but very, very quickly, I mean, up from like one or two at the beginning of the year.

right?

So I actually understand why. So you want to acquire investments? Cp, like I said, I think we wanted to invest. And while we were sort of, you know.

trying our best, you didn't say anything when I talked about him on the show a few weeks ago, you were just take their mums aware.

Actually, I knew that this deal was was basically in the works because the founder called us up and he had already promised as a small location around neve IT and he called up and said, actually i've got this deal so putting the round on hold and so I didn't think I should say anything because obviously still ongoing. But yeah, we knew about this deal that was kind of coming down the pipe. I would didn't know for sure that I would happen.

But but yeah, we heard IT was in the ball park of this like one point two, one point three billion dollar number, which like you said, because database ks is a private stock, maybe it's only half bad or seven, fifty or something like that, who knows, is still a great deal, a big you a lot of you are saying it's a crazy deal. I don't think it's a crazy deal because before this happened after the inside the term sheet for the series b, an investor came over the top to invest in a seven hundred million or evaluation. So people are kind of going crazy now.

I don't think that's neccessary. A rational behavior. I think that's more of evidence of armenia going on. But I think that we got offered is obviously a fantastic deal.

And I think what is evidence of is that these big enterprise in for a companies are going na try and build an end to end tool chain here. And I think maz M L had a very, very important part of the tool set, which is training up these models basic maxims ing GPU efficiency. Because GPU are basically 的 scarce item right now， we have a GPU shortage is probably not going to get Better for a year too, if that. So this is a very important part of the of the stack, and I think is probably a smart opposition for both.

Yeah data breme. I an snows snowflake, which compete to a data breaks, also acquired eva, which was founded by one of my colleagues, a guy I work with, a and a new, really great guy. Three are four hundred fifty million dollars. Last night, that deal was announced and the patter recognition that seems to emerges that if you are in the data infrastructure business, IT seems like it's becoming critical to level up.

That is not just about storing and moving and manipulating data, but the interpretation of data through models and the tooling to build those models becomes a critical component of all of these poor kids that these software companies have to provide to their enterprise software companies. And it's a big leveling up that's necessary, which seems to me there's other companies out there like them that are also going to need to strap on tools like this to make themselves competitive in the markets. Cape, which means that there are more acquisitions still to come. Yeah to mark jack out, you guys agree or have different point .

of you looking at IT. It's a it's a big number, the headline number, but I agree it's acts that the actual numbers half the number. So what was you know, if you look at the number of engineers they had based on linton data, in pitch book data, probably sixty, seventy employees, eighty employees and in forty, fifty of them are engineers.

So that puts IT at thirty million dollars per engineer. And that's one way to look at these acquisitions. And I think you know probably three to ten million dollars per engineer for like really high and engineers is more than going Price. But if this is half that amount because they bought IT with monopoly money, in other words, are twenty twenty one Price for their company, it's great.

And you know that um freeburg what's happening is this layer of uh natural language on top of any service, whether is something as simple as the help or something as complicated as a giant financial company with tons of transaction data being able to talk to IT and understand IT and then have your machine learning team build tools so business owners don't have to hire data scientists. The actual business leaders can talk to the data and get back answers or you say, hey, tell me about our customers, how have they changed over the year and then, hey, that's pretty interesting. Tell me more about our customers and you know how are they are reacting to these three new products and you will get back in intelligence that previously was unable to be accessed.

And so I was A I was just at sqa yesterday with or two days ago with the later seven graduates from our accelerator. We bring them to meet with and team we bring to me. And when we were at a koa, I realized that of the seven companies, four of them would not have been possible before these machine learning apps were available and open A S but one there are now in the companies i'm talking to their they're trialing freeburg on average six, seven, eight language models before they pick one.

And they're not picking OpenAI every time putting medicine. These businesses were not possible before this technology was introduced and available via API in the last six to twelve months. And I think there is a bunch of businesses that economically would not work, that now works.

I can give one example. There are countless meetings that are recorded over a zoo. M, right, think like a local schoolboy. Ds, be. Well, nobody could ever make a database of all the discussions going on at local school boards and then analyze all that.

But now, because all of those are saved on on zoom, and they OCR on zoom, and they are available for public record, you can adjust st every single one of those, and then build a blue berg terminal of every discussion happening at every school board, everywhere in the united states, and do that with ChatGPT or any of the language models, and then get really great insights from IT that would be too costly to transcribe at, you know, one hundred dollars every hour to and Normalize, let a loan to analyze. And so i'm looking at businesses as an investor. What i'm looking at right now is businesses that were previously not economically viable before this technology and then that are now economically valuable, if that makes sense. And i'm just looking at each company under that lengths right now. I'm finding a lot of interesting start .

as they seem to have done in common to moth similar news supporting this very quick evolution further up the value stacks. We were just talking about these companies that are uh providing effectively cooling as infrastructure. Um a little bit more of the value stack is uh inflection A I, which was started by mister ff, a slam and read halfman uh who was a cofounder while mister pha was working with him as a venture partner, are great lock but we stuff as you guys no was the deep mind, which google bought for four hundred million dollars, really created the core of google A I capability and is considered one of the kind of preeminent thought leaders and entrepreneurs built that has built in the space.

He started inflection, and the business just announced that they have just closed to one point three billion dollar of funding round like by microsoft hoffman bill gmt in video uh with an intention of building the largest AI cluster in the world twenty two thousand and video h one hundreds as part of uh the build up. But I think you've shared to month historically that these big funding rounds for these A I businesses that haven't necessarily been launched product yet don't make sense. Is this still you know kind of reinforce your point and you know what you're read on, on the inflection?

Well, the list Price of each one hundred is about thirty eight thousand, but the street Price, so it's very hard to get IT. So if you go to if you go to like ebay and try to buy each one hundred, it's like forty or forty five thousand. So you have a twenty two thousand clutter of each one hundred and that's about nine hundred.

Billion dollars of capex, just that. And then you know all the sunday ry stuff around IT call IT roughly plus remind us a billion dollars and so of the one and a half billion they've raised that say a billion goes into building this twenty two thousand note cluster. You have five hundred million for G N.

A. And so what that least bind is basically two and a half billion of enterprise value for their chat. Hot, so I don't know.

I mean, that never used pie. Has anybody any of you guys used that? You guys know it's good. Jackson, i'm sure you've experimented.

Whether have you experiment with that or not? Really which one? I that's what their, that's what their chat bott is called pie. Yes, I think it's a hey pie dog or ce.

I think I did try at once and IT was not memorable.

Op.

no, no, no, no. Hi, my personal one where you talk to IT and say, hey, how are you doing? Their concept is like you have this one relationship.

So it's like one chat, read. It's not kind of how I like to work with the I use threads and I share threats with my teams. So I am not in a fan of this like you have one relationship with one assistant.

I think the thing is it's interesting to note that very rarely when you invest money in the billions of dollars does the capex or purchase of one specific form of equipment take up literally twenty five percent of the enterprise value. That's a typical at least first start up hear if you're buying a fixed plant of a slow cat for generating business and maybe you know a bunch of that has some value.

So that's what stood out to me and all of these things. Freeport is, again, increasingly, this is all just the past through to in video. It's probably in some ways to pass through to the big cloud providers.

So whenever I see a chip maker and a cloud provider come together to put in a lot of money, it's essentially round tripping cash. They're giving the money, which then they used to buy their services and then you know just you're just pumping review. So I hope that works and which in the best. But that's the we just talked about.

where the infrastructure companies that are increasingly looking like more commodity service providers if they don't not level with A I to link acquiring mode and acquiring neve up, do you think that, that's an indication of more M A to come? And if so, doesn't that justify the increase funding, the increase valuation and the activity that we're seeing in the early stage with some of these businesses?

I think for sure, this can be more amin. I and I think the valuation will be high, not because these companies have a lot of revenue yet, but because it's very strategic for these big infer companies to assess the enter and tall chain.

I think we should explain to folks what that means. Enterprise e software companies provide software to businesses that are not traditionally technology companies. They also provide software other to help them build new tools to help them build out their business.

So enterprise software company consult the united airlines or consult VISA, consult a ford. And that software can then be used by that company to build tools that are powered by the data base or powered by the data analytics or increasingly powered by A I tools. And so they can build A I applications and A I capabilities into their business, whether the united airlines or expedia or VISA or forever. And that's why these, these, these companies are so critical in terms of enabling the transformation of industries with A I tooling and and why, you know, getting A I tooling into their capability that is so critical right now.

It's important to note those guys that whenever you have the emergence of a new sector sax, I think you are right that ema goes up, but IT tends to be that evaluations go down. Peak ema fraught happens at the ginning of the cycle when hype is at maximum and facts are at the minimum. And that's okay.

You know that's good for the startup is marginally negative for the existing shareholder of a large company. And then over time, IT gets itself sorted out when the facts are more obvious. So you kind of like you guys remember when the optical networking craze multibillion dollar acquires, where no.

they just disappear. We actually have like a market map that we did that I think can explain this concept of and and tool chain. So this is a slight that our growth team shut out to microbes and chemical era. They put this together in preparation in part of the investment number for mosaic.

And I think to explain the point you are kind of making freeburg, like why do enterprises need the services? One really simple way of thinking about right now is that every enterprise would like to roll out its own ChatGPT. They would all like to have their own internal version of ChatGPT, where the employees, for example, could ask questions and get answers.

That's where all the action is right now. Every enterprise would buy that tomorrow. If IT existed in the way to give exam.

the idea would be that, you know.

any employee, the company could ask questions to the AI model, the way you can ask ChatGPT questions, and IT would have all the enterprises data, and I would also understand their permissions and have all the security settings, so that only though I feel can get the right information. That's the kind of intelligence they weren't unlock. I mean, there are lots of other use cases as well.

but that's a really simple one, a corporate oracle. So I can if I an H R, I can ask k, tell me about our position.

poly copilot for the CEO. I think this me loss of these. I think the sales teams going to have their own copilot. I think the marketing teams going their own .

copilot and customer support .

is already customer support will have IT as of their own copilot. This give me a lot of these. I think enterprise is one one at the level of the called the company internet, where employees could disaster questions and but they do not want to share their data with OpenAI.

That's like very clear. They want to roll out their own models. So the question is why? How do you rely your own model? What the shows here is the different piece of the stacking of to have the first you capture of your data, you gotta label IT to be classified right for the model.

You you've got to store IT somewhere. Then you need to get one of these open source air models off the shelf. And there's a probably the most prominent site for this called a hugging face, which already has mean like I think a two billion dollar valuation that's another like really crazy valuation to A R multiple.

But hugging face has kind of all the open source models is very active. And so people grab the latest open source model that's the best fit for them, and then they need to train that model. And that's really where mode played.

And there's a ton of activity right now in this last mile problem of how do you customize a model to make IT suitable for your use, whether you're an enterprise, whether you are custom service team, whether your access APP that wanted to incorporate A I capabilities into your APP. That's where the all the action is right now is customizing these open source models that then leads to basically be able, able to get the right inferences. And there's a sort of separate category around hardware that is we don't play there, but this is kind of the n ten till chain. I think these big tech companies are going be racing to put this .

whole thing together to fill IT out. Yeah, yeah. And that to go be more reminds your prediction, which means more start up valuation boom and more capital deplane. There was a um couple of articles this week and to move this is your red meat as much as ukraine is saxes because you've talked about this at length social messaging start up I R L is shutting down after a board investigation found twenty five percent of its claimed twenty million users were actually fake.

This is a company that in june twenty twenty one raised one hundred and seventy million dollars series c and evaluation of over a billion dollars, making IT one of the many proclaimed uniforms of sick valley LED by soft playing vision fund. The investor who was sitting on the board said they didn't know if h we've ever given an investment term ship to a start up faster, then soften gift I R L at the time, at the same time, different story. But in the same week, a company called by you, which you have talked about in the past, was once valued at twenty two billion dollars and claimed to be india's most valuable startups in turmoil, and shareholders and creditors are seeking to the lute, the founder, and he's rushing to find capital and raise a billion dollars to try and boobie the company process.

One of the investors marked the companies evaluation down to five point one. Billions are down seventy five percent. I guess the question is, overall, are we still seeing this kind of her moil in silicon valley from desert era funding of startups in stark juxtaposition to the excitement of the frenzy and AI?

It's a characteristic of the exact same thing, meaning if you were replaced A I with critter, it's the exact same thing. If you're placed a ee with coworking, if you replaced A.

I with eero .

synthetic biology, if you replaced A I with sas. This is all happened before. I think it's important to identify what this is. What this is, is that there aren't enough checks and baLances, and there are fundamentally people who are deeply in experience to our in the wrong job. And in the few key moments where the .

venture capitalist .

is supposed to add value, that person is a equipped and unprepared. why? Because they were the V P of X, Y and z at some start up.

And they got hired through no fault of their own into a dynamic because these venture funds wanted to raise larger and larger amounts of money. So what happens? You don't even know how to ask the basic questions.

Or even more seriously, you don't have the courage to say the hard thing. And so these things happen that are Frankly, inexcusably, right? So in the case of one of these companies, and i've mentioned this before, they approach just for financing. And when we asked for a data room, we got a google doc link to a preachy.

Now there is no reasonable world in which a company is that unsophisticated when IT comes to understanding their business, right? A data room should include an enormous amount of Operational and financial metrics that you can use to come to your own conclusion today. You can present IT transparently to the investor. The idea that boards wouldn't even hold these companies accountable is just a sign that the board members themselves are pretty fundamentally and experience people. And I think the thing that we do, which is a mistake, is we say, oh, well, X Y N Z firm love this deal.

Yeah, that may be true, but really what that means is that firm, in a grab to get the money, hire some person that cheers some boxes, put them in the job, that person LED around, and there just wasn't any infrastructure to either teach that person or then that person to have the courage to hold the found, found responsible that will play out in A I as well. Is just that worth the beginning of the hype cycle, right? Because we replace A I, again, as I said, with any of these other things, we SAT here a little bit hand ringing when we saw these crazy valuations for these F T projects.

Where are those? No, right? So you name this is about fundamentally in experiences, people doing a job that seems pretty easy from the outside.

But in practical reality, there are only a few legends in our business. Most people, and I think he was shy gold man that did the matter this. Most people do not know how to run these businesses.

Well, nick will find that feet. You can show, I think it's like two and a half percent of all of the funds that in pitch books. So over eight hundred dozen have ever generated more than three acts in two funds.

So this is a hard business, IT. Turns out you can't just wake up in being investor, turns out, and that's what we're finding. So I don't know. It's not very surprising in the end, none of this is surprising.

Yeah, getting cheap had a really good point in the ddd. There is that there is a generation of venture capitals who were added during the boom who were Operators, but they've never been talked to have the discipline of capital allocators. And one of those key pieces of discipline is asking uncomfortable questions and doing uncomfortable diligence.

And you can trust people, but you need to verify that is a key part of the job. You can trust the founders, but you have to verify that the data you have is correct. The fact that soft bank did is an incredible valuation.

And the person who did this deal never checked that the customers were real, is a makes you unfit to serve in the job. And I will do diligence. And during that time period, freeburg, I had many founder said to me, you're asking for more diligent than the lead and this deal is closing and we are oversubscribed.

And I said, okay and I said, okay, so you're not you're not going to require this one. So h, no, we require that the diligence we want to see, you know very basic of your bank state, make your p nl. We want to talk to when you give us a list of your first thousand, give us a list of five hundred customers from last month, we will give you five numbers.

Were going to talk to five random customers like people did not want to do this stuff. We do that this work at our firm when we start to own five, ten percent of us, and we train our founders to do to be ready for proper diligence. All that diligence is happening now. Now in the early stages, there's not much to go on, but you can check up during this period, people founders used the hot market to not participate in the due diligence process. And when you look at companies, a lot of times people will suspend this belief.

You know, this company h by joy, don't know a ton about IT, but IT seems to have you like an educational lap, like a company brilliant at org e that triumph and I are um invite early investors in and trim thi bit great great business um and but then their business in their revenue seems to be based on a series of like human like in person instruction. Oh that's not a high gross margin business. sorry.

If you have to have a store front, you're not a software business anymore. And so people started giving valuations. And this the second part of this rap on this, people started giving valuations.

These companies that were real world businesses that were low margin businesses, direct consumer, whatever IT was, they suspended disbelief and they gave them valuations for high growth, high gross margin businesses. And that was another mistake. And you put those two things together, not doing diligence and then just made valuing of actual assets.

That's the clean up work that's that's going on right now. And IT takes years. I may took decades for them to penge.

Burning made of IT can take ten years for these frauds to come out. There was a guy and keep telling the S. C. C. About burning made of, I think he was like nine years since the first time he he let them know that they know perfect returns were just not possible statistically. So IT IT takes time, but they're picking these, uh, folks up everywhere. Dog monga picked up the mountainside grow, you know, guy from luna and it's going to take a decade to clean up all of the fraud in our space.

I think this a sort of mention by chaos that I think that needs to be a bigger point, which is the influence of fun size on these decisions. I mean, crash ones are in the sixty seven hundred million range. So when we write a check, it's usually ten, fifteen, twenty million dollar check in a series, a company that's like a big check for us. We're really going to sweat that decision for soft bank at ten to twenty million doors, check in a hundred billion dollar fund, which is what they had IT does even make sense, is a waste their time. Is I an rounding air for them to basically make decision?

Dollar check for you?

Yeah, exactly. So for them, they had to write to or million dollar checks to justify their time managing one hundred billion dollars. And so the mistake when they make a mistake is twenty times bigger than that should be.

That should have bit, maybe at ten million dollars stake, not a two hundred million dollars stake, but their fun size force into basic, right, this gigantic checks. And they are writing them into companies that were effectively seed stage or three day companies. If I was into a gross stage company, I think that's fine.

There's a lot more data and there's lot more customer references that you can check at a later stage company. By the way, the number one part of diligence i'd say for us other looking at matrix, which is anyone can do is the offset references. Talking to customers from a list that you fired out yourself, not from the company itself, is probably the single most important qualities part of of diligence. So I don't know what happened here.

but it's not stated explicit, but I think it's important. David U F. credibility. So when you say something, sex people listen, because you have Bonnie ed that are undeniable. Something will jack out something with you.

Freeport, I think you know and this may sound mean, but it's like mostly people are just X, Y, Z middle level VP from a startup, and that's a great thing. But it's not necessarily gonna you the gravity, especially if that's not what you are forced to do to help build bad company. And when push comes the shot inside of a bodings or in the middle of diligence, there has to be conflict.

I think it's a necessary feature of good decisions and that conflict rises internally within your investment team, but he also has to come externally with the executives of the startup and with the CEO themselves because when you're prosecuting a good decision, it's unbelievable that you agree on one hundred percent of things. And there has to be certain things that are controversial othe wise by definition, that company relief and pushing the boundary. So I just think that these are all skills that are poorly taught while you are building a business IT is not the reason why you should have been in charge of locating fifty one hundred million dollar checks in into companies that is .

just crazy tell I love your point, sax, though, about fund sized dynamics, fun sized dynamics. Our destiny. The right IT really is in the optimal fun size for venture is somewhere between two hundred fifty and six hundred million, according to everybody who's been doing this for, we know, more than a decade or two. And we successful whether .

when the cost are coming down. So as the input costs come down, where's engineers and copilot and hardware and abstraction layers, then theoretically, greater outcomes should be generated with fewer dollars in which would again tell you that fun sizes should actually go down, not up, that the reason they go up is because you get paid an annual management fee.

And so you obviously way, way, the way to make more money is to get two percent on a larger fixed number every year versus two percent on a smaller number. Or you know, for example, what we did was we were like, we're going to go and hit grand slams. And so I traded off management fee in return for thirty percent curry.

And that turned out to be literally a multi billion dollars smart decision because I gave up tens of millions of dollars up front for back end. Now the back end could have gone to zero, and maybe it's still cancer. But you know, most folks wouldn't do that. Most folks take the sort of risk, adjust the bad and say, I always take the two percent and all raise a two hundred million than a five hundred million than .

a billion than a two billion.

yeah, they stack them all, and they get the two percent in all of a sudden, the profits don't matter, which means the outcomes don't matter, which means the diligence is perfunctory. And IT becomes a theatrical expose that you can use, you know, the sort of thin figure leaf you can point to L, P, S, and say, we did our work here. Give us more money for this next fun.

That's the rat race the the venture community is in and it's gonna get played out in companies like I R L. And by juice and a lot of these A I companies, quite on. This is great. The chicks have I to say is did you see there are some article that reported .

that fund raising for late stage funds is dislike crater dead? So insight was trying to raise a tumbling of our fun. And theyve have been race to.

according article no, no. IT. IT was twenty two down to ten, and average the'd raised to.

okay, so ten percent. And then tiger was trying to raise twelve. They cut to six and then they can only raise .

two make sense .

yeah so the basically that's like I whatever a eighty and another person reduction and the size of these yeah .

in size the sovereignty were going for this money. Or buying sports teams, they're like, know what, instead of tech, let's just buy sports team and they're buying series save and they are buying manchester united and they're .

buying distressed portfolio, a huge, huge. Before, but there's a huge punch late stay tranced. It's only. And to get worse over the next eighteen months.

I ask brand last week, like how many of these army currents you think there are of the forty one hundred, he said thirty to forty percent. Yeah, I think he might be, could be look out of fourteen. I think IT could be seven hundred.

and I think at least seven hundred. I think it's I think .

it's probably sixty percent in the other forty percent. Let's say, how many of them have .

a downtown coming? I think sixty percent go to zero. Of the remaining forty percent, half then probably return money. And then of the remaining half, half of those maybe get one and a half x, and then you get a geometric distribution from there, which means the blended return of the entire stream of unicorns will be about one point one x. But I will be very massively distributed.

I think that is exactly right too much.

I everybody getting your money back, except if you don't have diverse ation. The I think the market is sending a very clear message, which is these use everybody.

no people, their money back. But on average.

it's going to be one extra turn. It's not going to be even leaders to create.

And glad that the term zombie n has held guys um we are coming up on our time. You guys want to do science corner or .

do you want to um yeah the three of us need to use the bathroom breaks to go heading just if you can just go to IT we're .

going to take a league will come back with your age joke you i'm .

OK i'm in a right. So .

look is great thing.

You don't like k talking about vaccines. I'd love for you to listen to you and actually give .

us the critique. Yes, I will.

That's going viral right now. He did such a job explaining his position on that.

He did such a good job.

yeah. Look, did you guys read the off of peace? I forward IT to you and I said, please, if you guys read that peace, i'll watch this clip and let's talk about next week as I cool.

So after is, yeah, he is a vaccine scientist who are F, K, junior references, often as someone that he met with and spoke with and says, I caught him in a lie and often basically said, here's exactly what happened. Here's the conversation. Here's the data, here's the fact, here's the science.

And I would really, really, really encourage you guys to read that, please. And then all watches clip and like, let's have a real kind of analytical conversation about statements that are good questions to ask, good things to interrogate and things that are being said that maybe aren't actually correct. And I think that we need to kind of reh as a service to ourselves and to people that listen to us really do that work.

So let's do that and come back and talk about next week, if that's cool. But I encourage everyone to read off. And he put on put the the link in the the note here. We continue, continue exactly.

You talk about that, senator, that all of the sudden just basically gave us the high .

men by the so let me just be clear. That's not the only high's men we've received on me all in summer. I will say that the speaker list for the all in summit looking and tactic, we're we're to have a great time, and i'm really excited for the conversion.

Are you are saying some folks husband does because of our support of r .

fk that did happen and specifically the fact that actually open minded. yeah. And then there were other folks who were insulted by things, what said about them, by people on the show. You guys want to hear about the the nanogram OK about this one of you.

are you talking about like the new h three? Eva, but IT only goes up to fifty miles.

poor. What is that?

The new hammer, the new H V, you know, the seven E V. They're coming.

The way of that are, you can is a roll. I remember one shorts, and I gave up the hammer back in the nineties. And every Coopers and not of manga okay so yesterday .

a paper .

was published .

by an international um scientific conservation this group is called nano graph and theyve been using a series of instruments to measure pull SARS and including a five hundred metre radio telescope away .

um which uh allows .

them to see what's so funny I said I had to stop myself. Data that was released as fifteen years of data from paul stars and pull stars are neutron stars which are stars that have collapsed on themselves and are basically super dance and starts spinning. And then these pollsters, you know, you basically like a light house, you can see the light, so looks like almost like a slow light. And we can see thousands of these across the universe, and we can observe them. And the rate at which the pulsing is coming out of these posters tells us a lot about what is happening in the space between earth and those pulses.

And when you collect enough data over a long enough period of time, which is what these folks have just released as fifteen years worth of the data, you can start to see really interesting patterns in the data that support the be fury, that space time itself is slowly vibrating, being stretched, being compressed, being pulled apart, being pushed back together, because of very large gravitational events happening around the universe. And what that means that you guys have all seen, you know, that kind of two dimensional image of a black hole. And nick, you could find one online and pull IT up where IT looks like the need of a black hole.

Space itself collapses in and IT collapses down. And what happens in space and time get significantly along gated when they're really close to gravity. Gravity actually pull space sucks IT and sucks in time, and IT becomes distorted. And so when you have large black holes around the universe spinning and running past each other, they're actually pulling and stretching space time itself. And that sends out ripples throughout the universe, ripples that are slow, undulating space and time itself.

So by observing all of these pulsars around the universe and the rate at which these policies are pulsing and seeing slight variations, we can start to measure and actually see those waves, those very slow waves of space time itself, undulating and being pushed and compressed. And so IT supports instances, general theory of relativity, which indicated that space time itself can be worked by gravity. And IT provides a really interesting picture on the universe itself that all around us, we have ge masses that are many, many millions or billions of light years away that are creating waves in space and time itself, that we, as humans, will never kind of observe, realized or feel ourselves.

But as part of the fabric and the underline nature of our universe, with space and time being, slowly worked and slowly along gated, slowly compressed um and it's a really fascinating picture of the universe over time a scientist gather more and more of this data IT will provide insights into wear in the universe these massive black hole events may be occurring and also provide insights into the early picture in the large scale structure of the universe which helps us Better understand how everything started and where we're all coming from. So IT was a really fascinating data release. I think it's a really kind of profound thing. If you take a little time and think about IT, it's super exciting, uh, getting a lot of press coverage today and encourage us all to pull our heads out of the ukraine war and silicon valley and money and all the stuff and realized that there are things of extraordinary scale and structure that .

they are happening around us. Let me ask you two questions. Number one, why does that matter? And number two, any theories here of what we might discover you if this, you know, ghost ten x or one hundred x in terms of the information we're getting?

Many years ago, IT was theorized that there's what's called the cosmic microwave background radiation, the cm b and what that is it's the left over heat from the formation of the universe, from the universe.

When the big bang happened, you and the scientists figured out how to create really sensitive of radio telescopes and um put in the the the uh in orbit and they started to observe the background radiation and what that showed us was the fingerprint of the universe, the original structure of the universe that created ultimately all the galaxy, super galaxies and then ultimately all the stars and then the planets and everything that that came from, that this could be the beginning of seeing a gravitational background of the universe, where we could actually start to perhaps the fingerprint of the space, time of the whole universe, of what the actual structure of space itself and time itself looks like throughout the universe, with the perturbations being driven by some very large massive supermassive black holes. There is a black hole d discovered this week that thirty billion times the mass of our son, there are these massive objects out there that are actively distorting space time. And we're going to start to get a singer print of that with this sort of data. And over time, that this gives us a Better sense of what the overall structure the universe looks like, not just from the heat energy that we're collecting, but also the gravitational waves that we are now able to observe through the inference of this .

data collect this just make, deepens our understanding of the universe. But there is not the universe, yeah, which is amazing .

and interesting, and validates and proves the general theory of relativity, which, if you think about the application of that down the road that may lead to things like close to or as fast as light travel or things related to time travel. You know there's a lot of things that people have theorized for decades about you know, black holes and the warping of space time itself. I'm not saying that any .

other stuff is did you see the three body problem?

Trailer, yeah, looks amazing. IT looks amazing. what? What great with the weight so long I did when they put out trailers. So how long? What is he coming up next year?

Oh, wow. Yeah, oh.

I still haven't seen your movie. Is that guys your movie that you want to me to see, which we want to try? Oh, everything.

everywhere.

all at once. I got a Better movie for you. I got a great poll for you. It's on paper of you right now. The a movie go about blackberry IT tells us a blackberry is like an independent film that is awesome. I just revealed on this week startups.

It's not just on this .

black ry called blackberry.

Yes, I think guys, this has episode hundred and thirty five of the all in pod. I really, here are .

my god, and just enough time to get you back to your nervous a concert.

What's the background on this one? Is that arrival? What is that? What's the background? What movie?

That's a black hole.

The black hole, just a black. O, K.

I think that from might be.

that might be, sex is hair because .

he looks like.

did you get a cut? sex?

He got a cut. Did you cut? IT? No.

show, show is the fly. Let's go. Let's say.

I mean.

it's just keep grounded .

out how you, anna, take us out. You do a Better.

Better day that come on action. Z one hundred board zoo, cheap poli hop tia two for tuesday, tears for fears coming up and free side project I traveled back in time with David freeburg two for tuesday. Jackson Brown.

look that here .

we go dator.

Of the world's great is botterill. I can do my M P R voice if you like. Alright, closing this out here. Episode one thirty five P C R W ninety two point three, the sound of a Monica this sunday at the venice uh, farmers market, two for one on the organic milk check IT out and I will see you all later on the politics of culture.

David sacks timing in on the republic lan G O P A position which we did consider freeburg deeply going into science and cheap, poking appetite on wealth disparity for everybody. I am your host here. I, K, C, R, W, chase and calgary is the world's most moderate, moderate. You see an next time. K, R, W.

Yes, I do.

I love you guys.

We want .

your water rainman .

give IT.

We open sources to the fans and .

they .

just got crazy with.

Like sexual attention just to rely .

somehow be .

we get.